To date, insurance pricing and conditions have remained stable, with flat or lower pricing being typical for the majority of insureds in the majority of coverage lines, notes insurance broker Marsh, which issued a report this week on the state of the P&C and reinsurance markets.

According to Marsh, a cornerstone of insurers’ overall stability has been the continuation of vigorous competition among insurers, which have generally weathered the economic storm as well or better than any portion of the financial sector.

The U.S. property/casualty industry does face continued challenges in 2010, however. For the remainder of 2010, Marsh anticipates that P/C insurers generally will focus on efforts to protect their balance sheets, including pricing adequacy and underwriting discipline, capital planning, and capturing catastrophe exposures in preparation for the possibility of large-scale catastrophe losses.

Reinsurance saw flat or lower pricing at the January 2010 reinsurance renewal, the result of an increase in capital that outpaced demand growth. Further erosion of rates was evident throughout the first half of 2010, despite the above-average level of catastrophe losses during the period, notes Marsh.

Overall, the financial markets stabilized and showed some growth in early 2010, but remain volatile. Investment returns are generally improving, but likely will be modest in the near term as interest rates are expected to remain low. In 2009 it became clear that insurers could not view investment earnings as a reliable source of significant earnings. To achieve risk-appropriate rates, insurers will need to maintain underwriting discipline. This will be their biggest challenge in the remainder of 2010 and into 2011 as broad-based hardening of rates is not expected in the near term, barring a market-changing event.

Marsh believes the outcome of the Atlantic hurricane season, which “officially” ends in November, will be a critical factor going forward. Many insurers exhausted a large portion of their catastrophe budgets in the first half of 2010. Should significant additional losses occur during the rest of the year, the cumulative effects could have a negative impact on some insurers’ capital positions, note the report.